Enterprise “digital transformation” hasn’t taken off as quickly as many had thought it would a few years ago. However, a firm developing fintech technology to help companies update antiquated financial services like payments is announcing a respectable investment round today, indicating that change is happening, but slowly.
About 150 large banks and other financial services providers presently employ Volante Technologies’ low-code cloud payment systems, which have garnered $66 million in investment. The deal also included Wavecrest Growth Partners and Wells Fargo Strategic Capital, who were in charge of the investment firm’s growth stage division, Sixth Street Growth.
A combination of loans and equity will provide the money; the firm has not disclosed the exact amount or provided a value breakdown. To date, Volante has raised $116 million.
Based in New Jersey, Volante plans to utilize the funds to expand into further foreign markets and sell to mid-tier banks to supplement the large institutions currently among its clientele.
The CEO and co-founder of Volante Technologies, Vijay Oddiraju, stated in a statement that “this latest investment will further accelerate our product roadmap for our customers, particularly in global real-time payments, UK NU.K. Payments Architecture (NPA), and domestic and cross-border ISO 20022 modernization.” He emphasized that expanding open banking-style services, where banks give up more APIs for interaction around new services, would influence some of its future initiatives. Modern payment methods are being used more and more in Europe thanks to FedNow Instant Payments, Clearing House RTP, and SEPA Instant Payments. This will also help us expand our Payments as a Service to include mid-tier banks.
Volante currently provides several services, such as corporate-to-bank connections, payments as a service, real-time payments, wire transfers inside the United States, and embedded preprocessing (to reduce transaction speeds).
It’s also a silent behemoth in specific ways. Seven of the top ten U.S. banks, two of the most extensive card networks, and two of the top three banks in Switzerland—a central hub for banking—were among Oddiraju’s clientele, he told TechCrunch. Additionally, 66% of “all US commercial deposits powered by Volante” were provided by the company.
According to the firm, among its 150 clients are many big banks and other suppliers of financial services, including Wells Fargo, Citi, BNY Mellon, Goldman Sachs, the Bank of Chile, and the Italian postal service. Its other strategic investors are BNY Mellon, Visa Ventures, Poste Italiane, and Citi.
Volante is taking advantage of the opportunity presented by legacy banks, trying to replace or supplement their current legacy products to become more competitive with upstart fintechs. Many of them can now accomplish this without significantly changing their existing infrastructure because of the expansion of cloud-based services.
Not all startups have seen this and are attempting to capitalize on it, including Volante. Other developing fintechs that mainly target incumbent and legacy providers include FintechOS, 10x, Thought Machine (valued at over $2 billion as of last year), Temenos (publicly listed), Mambu (valued at over $5 billion as of 2021 according to PitchBook), and several others.
The fascinating thing is that Stripe and other more contemporary fintechs in payments haven’t tackled this market. Not quite yet, anyhow. Although Stripe Treasury, its banking as a service product, is provided to platforms and other large companies in collaboration with large banks, it hasn’t developed any payment systems or other services that specifically target those large banks as clients up to this point.
However, Volante and similar companies are facing a challenge. While legacy businesses may implicitly understand the advantages of modern approaches, they have only made piecemeal commitments to replace outdated infrastructure and services with new ones due to organizational and budgetary constraints as well as the general deprioritization that results from the belief that “if it ain’t broke, don’t fix it.”
While it’s true that we’ve been experiencing a funding drought, I find it noteworthy that some of the candidates I mentioned above haven’t raised any money in more than a year—and in some cases, two years.
According to a recent Accenture survey, 86% of organizations have partially implemented modernization strategies. However, only 8% of enterprises can be categorized as “reinventors,” or, to put it another way, “moving to adopt a strategy of Total Enterprise Reinvention.” But that 86% indicates an extensive range of results. While some initiatives are successfully realized, others are launched but abandoned, and others are modest. The situation does not seem promising for more investments in digital transformation.
The excellent news for Volante is that it’s already growing and serving many significant organizations, and that its emphasis is appropriate given this fragmented reality. Specifically, it offers individualized services and capabilities instead of adopting or anticipating a massive platform strategy.
According to Sixth Street Growth MD Nari Ansari, “this is an ideal time to expand Volante’s reach,” as financial institutions prioritize fintech company collaborations and investments in payments modernization. “We are investing in Volante because we are convinced that they are best positioned to take advantage of the growth opportunity and surpass their competitors, and they have a distinct advantage over legacy providers and challengers.”